West v. Access Control Related Enterprises, LLC

Supreme Court of Delaware·Decided April 13, 2023·No. 230, 2022·Published

Opinion

IN THE SUPREME COURT OF THE STATE OF DELAWARE

WILLIAM WEST, § §

Plaintiff Below, § Appellant, § No. 230, 2022 §

v. § Court Below: Superior Court § of the State of Delaware ACCESS CONTROL RELATED § ENTERPRISES, LLC, LLR EQUITY § PARTNERS, IV, L.P., LLR EQUITY § C.A. No. N17C-11-137 PARTNERS PARALLEL IV, L.P., § SETH LEHR, an individual, § DAVID STIENES, an individual, § GREG CASE, an individual, § ROBERT CHEFITZ, an individual, § and JOSEPH GRILLO, an individual, § §

Defendant Below, § Appellee. §

Submitted: February 22, 2023 Decided: April 13, 2023

Before SEITZ, Chief Justice; VAUGHN and TRAYNOR, Justices. Upon appeal from the Superior Court. AFFIRMED.

Geoffrey G. Grivner, Esquire, Kody M. Sparks, Esquire, Buchanan Ingersoll & Rooney PC, Wilmington, Delaware; Ekwan E. Rhow, Esquire (argued), Timothy B. Yoo, Esquire, Kate S. Shin, Esquire, Alexander H. Tran, Esquire, Bird, Marella, Boxer, Wolpert, Nessim, Drooks, Lincenberg & Rhow, P.C., Los Angeles, California; for Plaintiff Below, William West.

Jody C. Barillare, Esquire, Amy M. Dudash, Esquire, Morgan, Lewis & Bockius LLP, Wilmington, Delaware; Michael L. Banks, Esquire (argued), Vishal H. Shah, Esquire, Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania; for Defendant

Below, Appellee Access Control Related Enterprises, LLC, LLR Equity Partners, IV, LLP, LLR Equity Partners Parallel IV, L.P., Seth Lehr, David Stienes, Greg Case, Robert Cheftiz, and Joseph Grillo.

SEITZ, Chief Justice:

William West, the founder of Access Control Related Enterprises, LLC (“ACRE”), was forced out as an officer of the company by its majority owners, LLR Equity Partners, IV, L.P. and LLR Equity Partners Parallel IV, L.P. (collectively, “LLR”). He responded by filing a wrongful termination suit against ACRE and others in California state court. The California court stayed the case based on the forum selection provisions in the controlling agreements that designated Delaware as the exclusive forum for disputes arising out of the agreements. After a failed detour to Delaware District Court, West filed the same claims in the Delaware Superior Court.

At first, the Superior Court ordered that the case be transferred to the Court of Chancery because the latter had exclusive jurisdiction over West’s breach of fiduciary duty claim. In response, West chose not to transfer the case, withdrew his breach of fiduciary duty claim, and persuaded the California court to lift the stay. The Superior Court then reversed course and decided to continue exercising jurisdiction over the case. It also denied West’s multiple motions to dismiss the Delaware case in favor of the California litigation. After more motion practice by both sides, a Delaware jury eventually found against West on his breach of contract claim.

West has not appealed the jury’s adverse verdict. Instead, he seeks to undo his loss in Delaware by challenging the Superior Court’s procedural rulings. First, he argues that the Superior Court no longer had jurisdiction once it issued the order transferring the case to the Court of Chancery. According to West, the court’s unprompted decision to continue to exercise jurisdiction was improper. Second, he claims that the Superior Court improperly denied his motions for voluntary dismissal. And third, he believes that if the Superior Court had applied forum non conveniens, it would have dismissed the Delaware case in favor of the California litigation.

We affirm the Superior Court’s decision to keep the dispute in Delaware. The Superior Court did not lose jurisdiction when it issued the transfer order. The transfer never occurred because West did not take the steps to effectuate the transfer to the Court of Chancery. Also, the court did not exceed its broad discretion when it denied West’s motions to dismiss. And forum non conveniens does not apply when the parties have contracted for a specific forum to resolve their disputes.

I.

A.

In 2012, West, a California resident, co-founded ACRE, a Delaware limited liability company. A year later, two Delaware limited partnerships – LLR Equity Partners, IV, L.P. and LLR Equity Partners Parallel IV, L.P. – became ACRE’s

majority owners and controlled its board. The LLR-controlled board appointed West ACRE’s Chief Financial Officer and Chief Operating Officer. The parties entered into eight agreements, four of which designated a state or federal court in Delaware as the exclusive forum to resolve disputes among the parties.1 The Securityholders’ Agreement and LLC Agreement both designated the Court of Chancery and any federal court in Delaware for dispute resolution, while the Severance Agreement and Noncompetition Agreement both designated any federal or state court in Delaware. The Securityholders’ Agreement also covered the rights and obligations of ACRE’s securities, and the Severance Agreement governed the employment relationships. The four other agreements either contained no forum selection provision or had a non-Delaware forum selection provision. Three of the agreements provided the grounds under which West could be terminated as an ACRE employee.

The parties’ relationship deteriorated for reasons not relevant to our decision, which led ACRE’s LLR-controlled board to terminate West for cause as ACRE’s CFO and COO. In 2016, West filed suit in the Los Angeles Superior Court against LLR and claimed wrongful termination, conversion, and breach of fiduciary duty,

1 App. to Opening Br. at A821-33 (Equity Incentive Plan); A834-44 (Noncompetition Agreement); A917-76 (Securityholders’ Agreement); A980-84 (Equity Award Agreement); A1124-30 (Severance Agreement); A1147-99 (LLC Agreement); A2587-639 (Contribution and Purchase Agreement); A2768-92 (Securities Purchase Agreement).

and sought declaratory relief.2 LLR responded by moving to dismiss or stay the action.3 The Los Angeles Superior Court granted the motion and stayed the case based on the forum selection provisions in the agreements.4 B.

In August 2017, West brought the same claims in the United States District Court for the District of Delaware. The District Court dismissed the action for lack of diversity jurisdiction. A few months later, West filed again in the Delaware Superior Court and added a breach of contract claim.5 LLR moved to dismiss the case for lack of jurisdiction, or alternatively, asked the Superior Court to transfer the case to the Court of Chancery to decide West’s equitable breach of fiduciary duty claim. The Delaware Superior Court granted the motion and permitted West to transfer the case to the Court of Chancery.6 As the court reasoned, the Court of Chancery could exercise jurisdiction over the legal and equitable claims.

West chose not to take the steps necessary to transfer the case and instead voluntarily dismissed his breach of fiduciary duty claim.7 He then moved to amend his complaint by dropping the breach of fiduciary duty claim and adding three new

2 Id. at A859-63 (West’s original complaint filed with the Los Angeles Superior Court). The Defendants also included ACRE and affiliates of ACRE and LLR. They will be referred to collectively as LLR. 3 Id. at A515 (Los Angeles Superior Court May 2, 2017 Order). 4 Id. at A514-25 (Los Angeles Superior Court May 2, 2017 Order). 5 Id. at A631-62 (West’s original complaint filed with the Delaware Superior Court). 6 Id. at A738 (Delaware Superior Court’s June 2018 Order). 7 Id. at A887 (Notice of voluntary dismissal of the breach of fiduciary claim).

claims: breach of the implied covenant of good faith and fair dealing, tortious interference with contract, and tortious interference with prospective business relations.8 The Superior Court granted West’s motion to amend his complaint,9 which prompted LLR to file a partial motion to dismiss. In June 2019, the court granted the motion in part and denied it in part. It dismissed the breach of implied covenant of good faith and fair dealing claim and allowed the other claims to proceed.10 C.

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West v. Access Control Related Enterprises, LLC, (Del. 2023).

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